Anglo Irish Bank loses euro3.8 billion in 6 months

DUBLIN — Anglo Irish Bank Corp. reported a massive net loss Friday of euro3.8 billion ($5.3 billion) in just six months, citing widespread defaults in its loans to property developers.

Finance Minister Brian Lenihan said the government, which nationalized the bank in January, planned to inject up to euro4 billion into Anglo in coming weeks subject to European Union regulatory approval. Ireland has already received permission to put euro1.5 billion into Anglo, but had held back to await Friday’s overdue publication of results.

Lenihan said the losses were “extremely disappointing,” but he was “satisfied that the full and frank disclosure of the problems faced by the bank is an important step in allowing the difficulties to be addressed in an orderly fashion.”

Anglo said its losses on dud loans into Ireland’s now-collapsed property market were likely to reach euro7.5 billion by September 2011, raising opposition lawmakers’ demands for the government to stop throwing good money after bad — and shut down the bank entirely.

“Unfortunately the news is very bad,” Anglo’s chairman, Donal O’Connor, said in a telephone interview.

O’Connor conceded that the bank and Finance Department officials had debated the pros and cons of closing the specialty small-business lender — but concluded that this would cost Irish taxpayers even more.

“We plan to reduce the risk of the bank, the size of the bank, the cost of the bank, and to maximize the recovery of all of the outstanding loans,” he said.

For the half-year ending March 31, Anglo said it recorded a pre-tax loss exceeding euro4.1 billion but benefitted from tax credits against its losses of euro335 million, lowering the net loss.

The government seized control of Anglo amid a string of scandals that undermined confidence in Ireland’s entire banking system.

Anglo admitted hiding tens of millions in loans to its own previous chairman, Sean FitzPatrick; floating loans to top businessmen on condition they buy more than euro450 million of Anglo’s now-worthless shares; and hiding the true scale of its losses from the global investment community. Ireland’s police and corporate ethics watchdog are pursuing related probes into possible criminal conduct in all three cases.

Analysts called Anglo’s losses unprecedented in Ireland’s corporate history, with no Irish company ever reporting losses in excess of euro500 million in even a full year. They noted that Ireland’s much bigger big two banks — Allied Irish and Bank of Ireland, both recent recipients of their own euro3.5 billion government bailouts — continue to report net profits.

“These are historic losses,” said Patrick Honohan, economist at Trinity College Dublin.

But Honohan said the huge loss figures demonstrated that Anglo was getting its accounting responsibilities much more seriously under government control, because it was now admitting the extent of its liabilities.

He said Friday’s results mean that Anglo’s shareholders and holders of the highest-risk Anglo bonds, worth almost euro3 billion, were likely to suffer total losses. The holders of highest-risk Anglo bonds are not insured under terms of Ireland’s 2008 bank-insurance program.

Opposition leaders called on the government to stop sinking taxpayers’ money into Anglo — and to name and shame the most heavily indebted property barons.

“We cannot continue to pour money into a bucket which is leaking this fast, when there is no prospect of repair,” said Richard Bruton, finance spokesman of the main opposition Fine Gael party.

Bruton said the proposed euro4 billion bailout represented euro2,500 from each Irish household, while Anglo could potentially rack up loan losses of euro15 billion.

“These the worst losses ever recorded by an Irish bank,” said the Labour Party’s Joan Burton, “and must rank among the worst performances of any bank, anywhere.”

On the Net:

Anglo results, www.angloirishbank.com/Investors/Reports/